Unconventional Investments That Can Make You Rich

Five Unconventional Investments That Can Help You Get Rich

Spreading your risk among stocks and bonds is a safe way to build your wealth. This is a “steady march” approach that can help you become financially free by the time you retire. But if you have ambitions of becoming rich to the tune of millions, then you have to start looking where the big returns are really made.

Here are 5 unconventional investments to help.

Private Equity

Private equity (or PE) investing can offer you huge multiples of return that make the stock market’s returns look anemic.

Once a PE firm finds a potential company as an investment, they buy it using as much financing as possible to leverage their returns. Then, they get to work upgrading the company’s operations and sales growth so that they can sell it at a future time. For example, you buy a company for $50 million with $10 million in cash as a down payment and finance the remaining $40 million. You invest another $10 million in upgrading its operations and doubling its sales growth from $15 million to $30 million annually.

Now, the company is growing again and in three years you can sell it for $100 million. You pay back the $40 million dollar loan, recuperate your $20 million investment and collect an additional $40 million in profit from the sale.

Look for PE funds that have a proven track record and be willing to take on a long-term approach. It takes time to get a floundering company back on the road to health, and they don’t always work out, but the payoffs can be worth it.

Angel Investing

An angel investor is someone who provides financing to a new company called a “startup.” Angel investing is not for the faint of heart, so if you’re not willing to lose all of your money 20 or 30 times in a row then you should pass on this type of investment.

On the upside, small investments of $1,000 to $10,000 have the potential to generate a massive return on your investment. You can find angel funds to invest in, but they often have strict requirements and may not let you participate. However, you can go to Angel.co and take part in syndicated deals with other investors.

Look for start-ups that introduce disruptive technology in a stagnant industry (ex. Uber or AirBNB) or have built in continuity into their product (ex. Netflix).

Licensing

This type of investing is highly specialized but can be incredibly lucrative. Buying intellectual property from businesses or artists puts you in the driver’s seat to collecting royalty payments from anyone who uses it.

At its peak, Microsoft became the most powerful company in the world by buying a software program from one developer and then licensing it to IBM and eventually everyone else in the computer industry. Michael Jackson bought up all the rights to the songs from The Beatles, collecting tens of millions of dollars in royalties as a result.

Look for any intellectual property that you feel will have a market value, and then you can buy, lease, or partner for the licensing rights and market for royalties. Your only limit is your imagination and ability to make a deal.

Infrastructure

Bridges, roads, power plants, hospitals, and more are all in need of being upgraded and renovated, but there is one problem: your government is strapped for cash. This presents a unique time for investors because the government is seeking partners for “Public Private Partnerships,” or “P3” projects for short.

In 2008, in South Hampton Roads, Virginia, the Jordan Bridge was in disrepair and the local council did not have the funds to repair it. In fact, the local council was so strapped for cash that they couldn’t even afford to demolish it. In desperation, they sold it to a private company for $10, under the condition that they build a new bridge.

Today, the bridge is a spectacular one-mile span and tall enough for passing ships to sail under. Tens of thousands of locals pay $2 to travel daily over the bridge without a penny of taxpayer money ever having been involved.

Look for more P3 funds seeking private money to fund future projects and you could literally own your own bridge one day while becoming rich in the process.

Timber

The case for timber is compelling when you consider that major institutions like Harvard University have billions allocated in timber.

Timber is a long-term investment that is renewable and generates steady payoffs, similar to an annuity. You plant timber on land, nurture it, and harvest every 7 to 10 years, then repeat the process.

If you’ve ever wanted to buy land as an investment, then consider buying land that you can plant timber on. It’s rather simple to get started but you have to make sure that the timber stays healthy from viruses and bugs like termites. The cost to maintain them is nominal but it can take years before you see a profit. The best way to approach a timber investment is to stagger planting each year. That way, you’ll have some trees reaching maturity while others are still seedlings, and you won’t have some years where you have no income.

Over time, both the land and the timber throw off returns above the stock market and you also enjoy serious tax advantages along the way.

Final Thoughts on Risk

Attempting to maximize returns and achieve great wealth is possible but you have to respect the risk involved.

To pull it off you have to understand yourself and your comfort level above any investment strategy. The one thing you must avoid at all cost is overextending yourself by investing too much in an investment you don’t understand.

That said, a portion of your capital can be strategically invested in your overall portfolio, limiting your risk but putting you in the position for a potential home run.

Like all things, look before you leap and exercise some common sense before investing any of your hard-earned money.